Instructions 8689 printable pdf download

Form 8689 (2006)

Page

Personal property. The source of income from the sale of

Section references are to the Internal Revenue Code unless

nondepreciable personal property is generally the seller’s tax home.

otherwise noted.

Income from the sale of inventory is generally sourced where the title

Instructions

to the property passes. See section 865 for details.

What’s new. For tax years ending after January 31, 2006 (or

Special rules may apply to bona fide residents of U.S.

beginning with tax year 2006 if a calendar year taxpayer), changes

possessions who have gain from dispositions of certain

have been made to the rules for determining if you are a bona fide

investment property within the 10-year period beginning

resident of the U.S. Virgin Islands (USVI). See chapter 1 of Pub. 570,

when they became a bona fide resident. For details, see

CAUTION

Tax Guide for Individuals With Income From U.S. Possessions, for

chapter 2 of Pub. 570, Temporary Regulations section

more information.

1.937-2T(f)(1), and Example 2 of section 1.937-2T(k).

Reminder. If, in tax year 2001 or later, you became or ceased to be a

Part II—Adjusted Gross Income From the

bona fide resident of a U.S. possession, you may be required to file

Form 8898, Statement for Individuals Who Begin or End Bona Fide

U.S. Virgin Islands

Residence in a U.S. Possession. The penalty for failure to provide the

required information is $1,000. For details, see the Instructions for

At the time these instructions went to print, Congress was

Form 8898.

considering legislation that would extend the educator

Purpose of form. Use Form 8689 to figure the amount of U.S. tax

expenses deduction and the tuition and fees deduction

allocable to the U.S. Virgin Islands.

that expired at the end of 2005. To find out if this

CAUTION

legislation was enacted, and for more details, go to

Who must file. If you were a U.S. citizen or resident alien (other than a

, click on More Forms and Publications, and then on

bona fide resident of the USVI) and had income from sources in the

What’s Hot in forms and publications, or see Pub. 553, Highlights of

USVI or income effectively connected with the conduct of a trade or

2006 Tax Changes.

business in the USVI, you may owe tax to the U.S. Virgin Islands. Your

USVI tax liability is a percentage of your U.S. tax liability.

Line 17. If you or your spouse had an Archer MSA deduction on Form

1040, line 23, figure the amount to report on line 17 by (1) dividing

your USVI compensation by your total (worldwide) compensation, and

Do not use this form if you were a bona fide resident of

(2) multiplying the amount of your Archer MSA deduction by the result

the U.S. Virgin Islands during the entire tax year.

in (1).

CAUTION

Lines 21 through 23. If you had USVI source self-employment

income, figure the amount to enter on each line by (1) dividing your

Joint returns. If you file jointly and only one spouse is a bona fide

USVI source self-employment income by your total self-employment

resident of the USVI for the entire tax year, the resident status for both

income, and (2) multiplying the total amount of each deduction that

spouses and subsequent tax treatment is determined by the spouse

applies to you by the result in (1).

with the higher adjusted gross income (AGI) (disregarding community

property laws). File Form 8689 only if the spouse with the higher AGI

Line 24. Enter the amount of penalty on early withdrawals from

is not a bona fide resident of the USVI for the entire tax year.

savings accounts in USVI banks or USVI branches of U.S. banks. The

Form 1099-INT or Form 1099-OID you received will show the amount

Where to file. You must file identical tax returns with the United

of any penalty you were charged.

States and the U.S. Virgin Islands. File your original Form 1040

Line 25. Enter the total of your and your spouse’s IRA deductions

(including Form 8689) with the Internal Revenue Service Center,

attributable to USVI compensation or earned income. Figure the

Austin, TX 73301-0215.

amount to report on line 25 in the same way you would an Archer

File a copy of your Form 1040 (with all attachments, forms, and

MSA deduction (see Line 17, above).

schedules, including Form 8689) with the Virgin Islands Bureau of

Line 28. Include in the total on line 28 the amount of any other

Internal Revenue, 9601 Estate Thomas, Charlotte Amalie, St. Thomas,

deductions included on Form 1040, line 36, that are attributable to

VI 00802. They will accept a copy of your U.S. return and process it as

your USVI income. On the dotted line next to line 28, enter the amount

an original return.

of each deduction attributable to your USVI income and identify it as

Credit for U.S. tax paid to the U.S. Virgin Islands. You can take a

you did on Form 1040, line 36.

credit on your U.S. return for the U.S. tax allocated to the USVI only if

you actually paid the tax to the U.S. Virgin Islands. To take the credit,

Part IV—Payments of Income Tax to the

you must complete Form 8689 and attach it to your Form 1040. Add

U.S. Virgin Islands

line 40 and line 44 of Form 8689 and include the amount in the total

on Form 1040, line 72. Next to line 72, enter “Form 8689” and the

Amounts overpaid to the United States generally will not be applied to

amount paid.

the amount you owe to the U.S. Virgin Islands. Similarly, amounts

Additional information. Pub. 570 has more information and an

overpaid to the U.S. Virgin Islands will not be applied to the amount

example of how to complete Form 8689. To get Pub. 570, see Quick

you owe to the United States.

and Easy Access to Tax Help and Forms in the instructions for Form

Penalty for Failure To Furnish Information

1040.

If you fail to provide the required information, you may have to pay a

Part I—Income From the U.S. Virgin Islands

$1,000 penalty for each failure unless you can show the failure was

Source of income. The rules for determining the source of income

due to reasonable cause and not willful neglect. This penalty is in

addition to any criminal penalty provided by law.

are explained in sections 861 through 865, section 937, in Temporary

Regulations section 1.937-2T, and in Pub. 570. Some general rules

are:

Paperwork Reduction Act Notice. We ask for the information on this

The source of wages, salaries, or tips is generally where the

form to carry out the Internal Revenue laws of the United States. You

services are performed. If you worked both in and outside the USVI,

are required to give us the information. We need it to ensure that you

include on line 1 only wages, salaries, or tips earned while you were in

are complying with these laws and to allow us to figure and collect the

the USVI.

right amount of tax.

The source of interest income is generally where the payer is

You are not required to provide the information requested on a form

located. For example, interest from a certificate of deposit issued by a

that is subject to the Paperwork Reduction Act unless the form

USVI bank or a USVI branch of a U.S. bank is USVI source income.

displays a valid OMB control number. Books or records relating to a

Generally, dividends are sourced where the paying corporation is

form or its instructions must be retained as long as their contents may

created or organized.

become material in the administration of any Internal Revenue law.

Generally, tax returns and return information are confidential, as

Taxable refunds, credits, or offsets of local U.S. Virgin Islands

required by section 6103.

income taxes only include nonmirror code income taxes.

The average time and expenses required to complete and file this

Alimony received from a person who is a bona fide resident of the

form will vary depending on individual circumstances. For the

U.S. Virgin Islands is USVI source income.

estimated averages, see the instructions for your income tax return.

Except as provided in regulations, income earned after December

If you have suggestions for making this form simpler, we would be

31, 2004, that is from sources within the United States or effectively

happy to hear from you. See the Instructions for your income tax

connected with the conduct of a trade or business in the United

return.

States is not income from the U.S. Virgin Islands.

Instructions 8689

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